FTSE 100 Hits An 8-Year Low Amid Bloodbath In Global Markets - Why Not Look for An Opportunity?

Tracking the broader trend in the Asia/Pacific financial markets, London’s benchmark FTSE 100 index slumped over 5% in the early trading hours of March 12, 2020 and recorded an 8-years low level of 5,481.60, a level which was last witnessed in July 2012.

After U.S President Donald Trump imposed restriction on European nations citizens, excluding the United kingdom from entering the United States for next 30 days, it has led to mayhem in the Asia/Pacific and European market on March 12, 2020, and a similar kind of fall is expected in the US market as well.

US President said that he is taking this tough action because of a large and continuously increasing number of coronavirus cases in Europe. However, this will not impact United Kingdome, Ireland and other countries outside the 26 nations Schengen common visa area.

As per reports, the deadly virus COVID-19 has now spread in over 130 countries (approximately), with 35 new cases emerging out in the United States. The death toll has now surged above 4,500, with more than 3,000 persons have so far died in China alone. In Italy, more than 800 deaths have been confirmed, and more than 400 deaths have been confirmed in Iran and numbers are still increasing in other countries. Which has spread out panic across the globe and speculative assets are heavily losing their value.

Despite a low-interest record rate in the UK after Bank of England exercised an emergency rate cut on 11 March 2020 to 0.25% from 0.75%, the equity market still struggling to sustain against the virus blow. The BoE in a statement also mentioned that the magnitude of coronavirus pandemic remains highly uncertain; therefore, economic activity is likely to be materially weak in Britain over the next couple of months.

The Jolted market sentiment across the world has dragged the US benchmark indices 20% lower from their record peak level of January 2020, which is typically recognised as a bearish cycle, many other major benchmark indices of different countries and regions are also hovering near their multi-year lows.

Most of the Asian/Pacific markets were down by more than 5%, with Australia’s S&P/ASX 200 shedding off 421 points or 7.36% to 5,304.60, India’s BSE Sensex plummeted 2919 points or 8.18% to 32,778.14, Japan’s Nikkei 225 slumped 856 points or 4.41% to 18,559.63, New Zealand’s NZX 50 was down 540.33 points or 4.9% to 10,333.27, South Korea’s KOSPI plunged by 74 points or 3.87% to 1,834. Also, European markets were following the calf path of Asia/Pacific markets, with London’s FTSE 100 giving up 323 points or 5.5% to 5,559, Germany’s DAX nudged down 581 points or 5.6% to 9,854, France’s CAC 40 slumped 253.8 points or 5.51% to 4,353, and however, U.S markets are yet to and in all likelihood would follow the suit.

Amid, market bloodbath the FTSE 100 index has not only registered a new 52-week low level but has hit a multiyear low-level today, with many of its constituents also hitting multiyear as well as 52-week lows, with AVEVA Group PLC, Coca Cola HBC AG, Easyjet PLC, Kingfisher PLC and Smiths Group PLC being among the worst hit on the London Stock Exchange today, declining by 9.3%, 8.4%, 7.6%, and 6.19% respectively.

Over the past five trading sessions, the FTSE 100 has so far shed more than 13%, whereas shares of Hotels, Motels & Cruise Lines - Carnival PLC slumped approximately 32%, multiline utility company Centrica Plc has given up more than 30% in the same time. Â YoY return of the FTSE 100 index stood at ~ -18%, whereas on a YTD basis the index has tumbled more than 22%.

FTSE 100 had registered a life-time high of 7,903.50 on May 22, 2018, and at the current level of 5,559.0, the index is approximately 30% off those peak levels.

However, there are 14 FTSE 100 constituents’ stocks which have tumbled more than 20% in the past five market days. The list contain those stocks:

(Source: Thomson Reuters)

Pain is deep and widely outspread, hands down, no doubt, but time and again in every such crash, markets have recouped even more strongly and registered new life-time highs after going through a phase of a sharp correction.

Bull-run and Bear-cycle are different phases of equity markets; no one can time the market; what they can do is to invest in quality businesses whenever they are available below their intrinsic value. Also, crashes are a good time for bargain hunt as many quality high yielding stocks would be available at dirt-cheap rate.

Has the market bottomed out?

In the equity market, there are 3 waves of selling.

Wave 1. Everyone is trying to buy at the dip.

Wave 2. Everyone is crying at the dip.

Wave 3. Everyone dies at the dip and forced to liquidate their holding (bottom is made here)

Are we near wave 3?

No one actually knows that where the bottom lies, but even at this price level, many global quality opportunities on the London Stock Exchange are available at dirt-cheap prices and valuation with significantly high yield income opportunities as well.